Spread Betting started around 1984/5 and was used as a way to speculate on the financial markets. Bets were placed on how much the stock exchange would go up or down on a certain day. This form of gambling has now been adapted for betting on sports events. Using Horseracing as an example, here's how it works.

Instead of betting on individual horses winning or losing, it is betting on combination of events like how the favourites will perform at a certain race meeting, what the starting prices of all the winning horses will be and what the winning distances will be. The spread betting company will make a prediction about a particular event. You need to decide whether their prediction is too high or too low. The more you are right, the more you win and the more you are wrong, the more you will lose. Due to its origins in the financial market, the terms buying and selling are used. Buying is betting higher and selling is betting lower.

Spreadbetting has a greater level of financial risk than traditional betting. With traditional betting you know beforehand how much money you will lose if your bet is unsuccessful. You simply lose the amount of your stake. With spread betting, however, it is possible to have huge losses. To restrict the amount you can lose, it is possible to place a stop order on a bet. As well as huge losses, you can, on the other hand, achieve huge winnings.

A spread betting company will give a favourite's index at each meeting. This index is based on a score that is given to favourites that are placed in a race. The scores given can vary but as a general guide a favourite is awarded 25 points for winning, 10 points for coming second, five points for third place and 0 points for finishing in any other position. If there are joint favourites, then the one with the lowest race card number is considered the favourite.

To place a bet, you need to decide whether to bet higher or lower than the predicted score. If, for example, the predicted score is 70 and you think the likely score is higher then you bet high (buy). If you think the predicted score will be lower then you bet low (sell). The payout is calculated on the basis of how much lower or higher the score is.

If you bet £2 high and the result is 85 then you win 15 times your stake: (85-70) x your stake = 15 x £2 = £30.
If you bet low and the result is 80 then you lose 10 times your stake: (80-70) x your stake = 10 x £2 = £20.

Apart from betting on favourites, you can also bet on jockey performance. This works on the same principle as the favourites bet. You can also bet on other sports such as football. Spread betting companies will offer all different kinds of indexes on a particular match but the principle is the same.